Bookmark and Share
Economic Development, Faculty & Staff Focus, General Information, Media Advisory, Research

LSU Economics Chair Testifies Before House Committee

04/17/2014 03:50 PM

BATON ROUGE  – Bob Newman, chair of the LSU Department of Economics and the Gulf Coast Coca-Cola Bottling Co. Inc. Distinguished Professor of Business Administration #2, testified before the House Committee on Labor and Industrial Relations on Thursday, April 10. Newman, who has been teaching and conducting research in economics for more than 40 years, was called upon to speak about the likely impacts of an increase in the state’s minimum wage.
 

“All of my classes include at least one lecture on the theoretical and empirical analysis of the effects of minimum wages on labor markets,” Newman told the committee.
 

Newman, whose areas of specialization are labor economics, industrial relations and health care economics, serves as the senior editor of the Journal of Labor Research, a peer-reviewed journal specializing in labor and industrial relations research.
 

“During my tenure as editor, we have published a number of empirical studies dealing with the economic effects of minimum wages,” Newman said. “I believe any policy initiative should be informed by economics and evidence, so I would like to offer a few comments about what economic research concludes about the effects of minimum wages.”
 

According to Newman, research shows that while the goal of increasing the minimum wage is to raise incomes of low-income families and to reduce poverty, there is a large body of evidence that indicates proposed changes to the minimum wage will ultimately do more harm than good. The unintended consequences include:

 

  • Discouraging employers from hiring low-skilled workers
  • Providing strong incentives for employers to reduce the size of their existing low-skilled workforce
  • Causing a 1 percent reduction in jobs for each 10 percent increase in the minimum wage
  • Causing a 2 percent reduction in teenage school enrollment for each 10 percent increase in the minimum wage
                   

“Ultimately, these ‘disemployment’ effects will fall primarily on low-income workers,” Newman said. “Meaning a higher minimum wage will actually make low-income families worse off.”
 

Noting that minimum wages can in fact increase poverty levels, Newman added that a higher minimum wage is “likely to reduce training, schooling and work experience—three of the most important paths toward higher earnings for individual workers.”
 

“The real cause of low earnings is not low wages; it is low skill levels,” Newman said. “So policies to address poverty should focus on increasing labor market skills of low-income workers not mandating that employers pay higher wages.”
 

The Department of Economics at LSU’s E. J. Ourso College of Business offers courses that provide its undergraduate and graduate students an intellectual challenge and strong analytic training and the tools to understand the economic and social problems faced both domestically and internationally. The faculty’s dedication to quality teaching and research is reflected by numerous awards received and peer-reviewed scholarly articles published in high-quality economic journals. The Journal of Labor Research and the Journal of Macroeconomics, two highly regarded academic journals, are edited within the department. For more information, visit www.business.lsu.edu/economics or call 225-578-5211.

E. J. Ourso College of Business
225-578-8865